A Democracy, Not an Oligarchy

An ill wind blows. Two-thirds of the electorate thinks America is heading in the wrong direction. For the right, as ever, the past ought to be prologue. “Take our country back,” is the Tea Party rallying cry, implying nostalgia for a bygone time and place and, more ominously, the usurpation of power by unnamed interlopers. The narrative is limited to a minority, but a broad consensus exists that the country is dangerously adrift, that something vital, something intrinsic, has been lost, perhaps permanently.

The recession is the ostensible cause of the malaise. It has crushed hope, including the variety that we can believe in: six in ten voters lack faith in President Obama’s ability to make the right choices for the country, including his handling of the economy, whose overall state almost all Americans rate negatively. But will we once again be happy if and when happy days are here again?

No, not unless something is done about the real wellspring of our discontent, the metamorphosis of our democracy into oligarchy. Though unarticulated in the body politic, rarely called out and identified, Americans of all ideological stripes sense its menace, even if many misplace blame on handy ghosts and goblins.

Robert Reich captures it well. The former labor secretary compares present distributions of income with those in other periods in American history. He points out that the two biggest economic downturns of the last hundred years came about at peak levels of income inequality. The onset of the first, the Great Depression, occurred after a period of wealth concentration when the richest one percent enjoyed almost 24 percent of the nation’s income.

That share shrank over the ensuing decades because of the New Deal, GI Bill, high marginal tax rates, Great Society, among other reasons, and by the 1970s incomes variation had flattened significantly, with the top one percent taking in about nine percent of national income. But inequality grew again. By 2007, a rich Reconquista abetted by laissez-faire policies had given the affluent some of that old time religion, as the most affluent once again acquired their pre-Depression share of national income.

Why should this matter?

Reich cites two reasons. First, dramatic boom-and-bust cycles are not just correlated with wealth concentration, but rather are a cause of them. “When earnings accumulate at the top,” Reich writes, “people at the top invest their wealth in whatever assets seem most likely to attract other big investors. This causes the prices of certain assets—commodities, stocks, dot-coms or real estate—to become wildly inflated. Such speculative bubbles eventually burst, leaving behind mountains of near-worthless collateral.”

Wealth concentration also implies that the fruits of prosperity are not widely shared, trapping many in a vicious cycle of debt. Again, Reich: “The problem isn’t that typical Americans have spent beyond their means. It’s that their means haven’t kept up with what the growing economy could and should have been able to provide them.”

There are, of course, many ways of gauging inequality. The slate of candidates in the upcoming elections confirms that a government by and for the people is increasingly quaint; government is more and more by and for the rich. In California, Meg Whitman, the former eBay CEO said to be worth $1.3 billion, dropped $91 million just to win the GOP nomination for governor. On the state’s ballot will be another former CEO, Carly Fiorina, who once led HP and is now the Republican candidate for Senate.

In Florida, Rick Scott, the former head of Columbia/HCA, a chain of for-profit hospitals, spent $20 million to win the Republican nomination for governor, while celebrity-friendly billionaire businessman Jeff Greene may well get the Democratic nod for Senate. And then there is Connecticut, home of Democratic gubernatorial candidate Ned Lamont, the geeky blue-blood multimillionaire, and Linda McMahon, the professional wrestling mogul turned Republican ready to rumble for Senate.

Having a small fortune may not guarantee electoral success, but to paraphrase Tevye from Fiddler on the Roof, it does not hurt either. However, our electoral system’s fortunes are hurt when fortunes have undue influence, a situation that might well become more pronounced following a recent Supreme Court decision allowing unlimited corporate spending on political campaigns.

“As money has risen to the top, so has political power,” observes Reich. And as money and power have concentrated, our politics have soured. The polarization reflects the polization of power in society, and the vitriol the vitriol associated with the loss of sense of citizenship as the country moves from democracy to oligarchy. It is no wonder, then, that the popular battle cry is “Take our country back.” Take it back, indeed, or our democracy, our government of the people, by the people, for the people, shall be no more.

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